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What are the risks of buying a foreclosure?

  • December 15 2013 - Cape Coral
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Answers (8)

Foreclosure property are owned by the bank and therefore you do not get the same disclosure documents that you would from a traditional sale. I would make sure you get a good inspector. 
  • December 19 2013
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There are risks.  They are not different than buying from a private homeowner.  Do your inspections, do your diligence and use a REALTOR.  You will be fine

Ken Cash
  • December 19 2013
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There are a lot of risks when purchasing a foreclosure. I would suggest getting an inspection. There are title issues and property damage that can complicate the process. 
  • December 19 2013
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Title issues, liens that have to be paid off, occupants who don't really want to leave, deferred maintenance and damage to the property. Did I miss anything?

  • December 16 2013
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The biggest risks are the people still living in the basement.....

If you are closing through a title company, fairly common here in Chicago, those concerns should be taken care of.

I think the biggest risk with foreclosures, and really, this is as much of a disappointment as well, is that you don't meet the previous owners. In a traditional house sale, where an owner has had the property for a certain number of years, you get a better idea of what has been maintained and why, some of this coming before the contract, and more it near closing.

It is hard to know if damage in a foreclosed home is minor or major without major demolition that a home inspector will not do. If you see these things in an occupied home, you can sometimes (yes, not all home sellers are forthcoming) get a better understanding of why the ceiling has some bubbling, or about the water marks in the basement, allowing you to better understand your impending costs.

Plus, it's just plain nice to be part of the process the passes the home from one family to the next. Despite all the cynical badgering we can throw at homes, for most people, they represent a living part of their soul, and it is one of the untold joys in life to have that torch passed to you.
  • December 16 2013
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Profile picture for gator70
The risk are less when you buy it from the lender, but still valid. I would never buy a foreclosure from a auction. The lender have some responsibility to make some disclosures. 
  • December 16 2013
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Profile picture for Tyler Tapley
Get a home inspection!
  • December 16 2013
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Hi Ken,

I don't want to sound so negative, but you did ask about the risks.
Just to name a few:

- you don't know if the property has clear title, e.g., there could be IRS liens 
- you'll be buying the home As-Is, so you have to figure in the costs of doing your own inspections and all the repairs
- the previous owner may still be in the property when you get the keys and you may have to go through the cost to evict 
- foreclosure is not a fast process so you need time (and patience) 

Either way good luck and hope you find a good property!
  • December 15 2013
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